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This article was posted elsewhere and prompted my finding and posting of teh following two articles.
quote: The following link is an article about the Carlyle Group based in DC. Like the author says, it is a deep rabbit hole with lots of Washington players. See link for full article, below is page one. http://www.fortune.com/indexw.jhtml?channel=artcol.jht ml&doc_id=206684&page=1&_DARGS=/artcol.jhtml.3_A&_DAV=artcol.jhtml
CARLYLE GROUP
The Big Guys Work For the Carlyle Group
What exactly does it do? To find out, we peeked down the rabbit hole.
FORTUNE
Monday, March 18, 2002
By Melanie Warner
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Are you the sort of person who believes in conspiracies--the Trilateral Commission secretly runs the world, that sort of thing? Well, then, here's a company for you. The Carlyle Group, a Washington, D.C., buyout firm, is one of the nation's largest defense contractors. It has billions of dollars at its disposal and employs a few important people. Maybe you've heard of them: former Secretary of State Jim Baker, former Secretary of Defense Frank Carlucci, and former White House budget director Dick Darman. Wait, we're just getting warmed up. William Kennard, who recently headed the FCC, and Arthur Levitt, who just left the SEC, also work for Carlyle. As do former British Prime Minister John Major and former Philippines President Fidel Ramos. Let's see, are we forgetting anyone? Oh, right, former President George Herbert Walker Bush is on the payroll too.
The firm also has about a dozen investors from Saudi Arabia, including, until recently, the bin Laden family. Yes, those bin Ladens. Is it any wonder that Internet sites with names like paranoiamagazine.com are rife with stories about Carlyle's shadowy, corrupt global network? And it's not just wackos. "Be careful," a tech entrepreneur in Silicon Valley wrote in an e-mail when he learned I was doing a story on Carlyle. "The rabbit hole runs really deep on this one.''
Leaving aside the conspiracies for a moment, what exactly does the Carlyle Group do? Start with the basics: It's one of the world's largest and most powerful private-equity investment firms, meaning it buys and sells privately held companies and divisions of large public companies for big profits. Founded in 1987 (and named after the favorite New York hotel of the firm's first investors, the Mellon family), Carlyle has raised a total of $14 billion from investors in just the past five years--more than any other private-equity firm has attracted in the same period, except the Blackstone Group and CSFB Private Equity. Profits, too, have been pretty terrific. Not counting the standard 20% cut that goes to Carlyle's partners and managing directors, the firm's average annual rate of return has been 36%.
It's quite a success story, and to understand how Carlyle pulled it off, FORTUNE spent a month and a half peeking down that rabbit hole. One conclusion seems clear: While most of the conspiracy theories are amusingly overblown, this is a firm that's been built on the backs of Bush and other big shots who have lent Carlyle their names, their golden networks of friends in high places, and their insights into how government works. It wasn't until Carlucci joined, for instance, that Carlyle really took off. Founded by David Rubenstein, a lawyer who worked as an aide in the Carter White House, Bill Conway, a former CFO at MCI, and Dan D'Aniello, a former finance executive for Marriott, Carlyle early on invested in a motley assortment of deals--buying an airline-catering business, a health-food chain, and a biotech firm, for example. In 1990, Carlucci got the trio interested in the $150-billion-a-year U.S. defense industry, making introductions to companies that would turn into some of Carlyle's most lucrative investments. Rubenstein quickly realized the wisdom of recruiting a former Secretary of Defense and followed it up with a former Secretary of State, then a former White House budget director, and on and on.
The revolving door has long been a fact of life in Washington, but Carlyle has given it a new spin. Instead of toiling away for a trade organization or consulting firm for a measly $250,000 a year, former government officials can rake in serious cash by getting equity cuts on corporate deals. Several of the onetime government officials who have hooked up with Carlyle--Carlucci, Baker, and Darman, in particular--have made millions. Carlyle isn't the only organization doing it: Metropolitan West Financial in Los Angeles recently hired Al Gore to help with tech deals and make introductions overseas, for example. But Carlyle, which pioneered the idea, seems more adept at it than any other firm.
Unlike other private-equity groups, Carlyle concentrates on companies funded by the government, such as defense contractors, or those affected by government regulation, such as telecommunications firms, and then hires people with relevant government experience. As the company once put it in a brochure, "We invest in niche opportunities created in industries heavily affected by changes in governmental policies." Doing so, of course, raises the ultimate rabbit-hole question: Is Carlyle's approach just a smart twist on good old business networking or a step over the line into an ethical twilight zone in which the public trust is broken?
quote: Here's more from last years Guardian @: http://www.guardian.co.uk/Archive/Article/0,4273,4288516,00.html
The ex-presidents' club
Oliver Burkeman and Julian Borger
Guardian
Wednesday October 31, 2001
It is hard to imagine an address closer to the heart of American power. The offices of the Carlyle Group are on Pennsylvania Avenue in Washington DC, midway between the White House and the Capitol building, and within a stone's throw of the headquarters of the FBI and numerous government departments. The address reflects Carlyle's position at the very centre of the Washington establishment, but amid the frenetic politicking that has occupied the higher reaches of that world in recent weeks, few have paid it much attention. Elsewhere, few have even heard of it.
This is exactly the way Carlyle likes it. For 14 years now, with almost no publicity, the company has been signing up an impressive list of former politicians - including the first President Bush and his secretary of state, James Baker; John Major; one-time World Bank treasurer Afsaneh Masheyekhi and several south-east Asian powerbrokers - and using their contacts and influence to promote the group. Among the companies Carlyle owns are those which make equipment, vehicles and munitions for the US military, and its celebrity employees have long served an ingenious dual purpose, helping encourage investments from the very wealthy while also smoothing the path for Carlyle's defence firms.
But since the start of the "war on terrorism", the firm - unofficially valued at $3.5bn - has taken on an added significance. Carlyle has become the thread which indirectly links American military policy in Afghanistan to the personal financial fortunes of its celebrity employees, not least the current president's father. And, until earlier this month, Carlyle provided another curious link to the Afghan crisis: among the firm's multi-million-dollar investors were members of the family of Osama bin Laden.
The closest the Carlyle Group has previously come to public attention was last May, when a Seoul-based employee called Peter Chung was forced to resign from his £100,000-a-year job after sending an email to friends - subsequently forwarded to thousands of others - boasting of his plans to "fuck every hot chick in Korea over the next two years". The more business-oriented activities of Carlyle's staff have been conducted much more quietly: since it was founded in 1987 by David Rubenstein, a policy assistant in Jimmy Carter's administration, and two lawyer friends, the firm has been dispatching an array of former world leaders on a series of strategic networking trips.
Last year, George Bush Sr and John Major travelled to Riyadh to talk with senior Saudi businessmen. In September 2000, Carlyle hired speakers including Colin Powell and AOL Time Warner chair Steve Case to address an extravagant party at Washington's Monarch Hotel. Months later, Major joined James Baker for a function at the Lanesborough Hotel in London, to explain the Florida election controversy to the wealthy attendees.
We can assume that Carlyle pays well. Neither Major's office nor Carlyle will confirm the details of his salary as European chairman - an appointment announced shortly before he left the House of Commons after the election - but we know, for the purposes of comparison, that he is paid £105,000 for 28 days' work a year for an unrelated non-executive directorship. Bush gives speeches for the company and is paid with stakes in the firm's investments, believed to be worth at least $80,000 per appearance. The benefits have attracted political stars from around the world: former Philippines president Fidel Ramos is an adviser, as is former Thai premier Anand Panyarachun - as well as former Bundesbank president Karl Otto Pohl, and Arthur Levitt, former chairman of the SEC, the US stock market regulator.
Carlyle partners, who include Baker and the firm's chairman, Frank Carlucci - Ronald Reagan's defence secretary and a former deputy director of the CIA - own stakes that would be worth $180m each if each partner owned an equal slice. As in many areas of its work, though, Carlyle is not obliged to reveal the details, and chooses not to.
Among the defence firms which benefit from Carlyle's success is United Defense, a Virginia-based contractor which makes vertical missile launch systems currently on board US Navy ships in the Arabian sea, as well as a range of other weapons delivery systems and combat vehicles. Carlyle's other holdings span an improbable range, taking in the French newspaper Le Figaro and the company which bottles Dr Pepper.
"They are big, and they are quiet," says David Mulholland, business editor of Jane's Defence Weekly. "But they're not easy to get information out of, [but] United Defense are going to do well [in the current conflict]." United also owns Bofors, a Swedish munitions manufacturer.
Carlyle has said that it does not lobby the federal government, thus avoiding a conflict of interest when, for example, Carlucci met Rumsfeld in February when several important defence contracts were under consideration. But critics see that as a matter of definition.
"It should be a deep cause for concern that a closely held company like Carlyle can simultaneously have directors and advisers that are doing business and making money and also advising the president of the United States," says Peter Eisner, managing director of the Center for Public Integrity, a non-profit-making Washington think-tank. "The problem comes when private business and public policy blend together. What hat is former president Bush wearing when he tells Crown Prince Abdullah not to worry about US policy in the Middle East? What hat does he use when he deals with South Korea, and causes policy changes there? Or when James Baker helps argue the presidential election in the younger Bush's favour? It's a kitchen-cabinet situation, and the informality involved is precisely a mark of Carlyle's success."
The world of private equity is an inherently secretive one. Firms such as Carlyle make most of their money buying firms which are not publicly traded, overhauling them and selling them at a profit, so the process by which likely targets are evaluated is much more confidential than on the open market. "These firms certainly don't go out of their way to get into the headlines," says Steven Bell, chief economist at Deutsche Asset Management. "They'd rather make a splash in Institutional Pensions Week. The aim is to realise very high returns for your investors while exerting a high degree of control over the company. You don't want to get into the headlines when you force the management to fire a director."
The process has worked wonders at United, and this month the firm announced plans to go public, giving Carlyle the chance to cash in its investment.
But what sets Carlyle apart is the way it has exploited its political contacts. When Carlucci arrived there in 1989, he brought with him a phalanx of former subordinates from the CIA and the Pentagon, and an awareness of the scale of business a company like Carlyle could do in the corridors and steak-houses of Washington. In a decade and a half, the firm has been able to realise a 34% rate of return on its investments, and now claims to be the largest private equity firm in the world. Success brought more investors, including the international financier George Soros and, in 1995, the wealthy Saudi Binladin family, who insist they long ago severed all links with their notorious relative. The first president Bush is understood to have visited the Binladins in Saudi Arabia twice on the firm's behalf.
The Carlyle Group does not employ anyone at its Washington headquarters to deal with the press. Inquiries about the links with the Binladins (as most of the family choose to spell their name) are instead referred to someone outside the company, on condition he is referred to only as "a source familiar with the relationship". This source says: "I can confirm the fact that any Binladin Group investment in Carlyle has been terminated or is being terminated. It amounted to a $2m investment in the Carlyle II Fund, which was anyway a very small portion of a $1.3bn fund. In the scheme of the investments and in the scheme of the business of either party it was very small. We have to get this into perspective. But I think there was a sense that there were questions being raised and some controversy, and for such a small amount of money it was something that we wanted to put behind us. It was just a business decision."
But if the Binladins' connection to the Carlyle Group lasted no more than six years, the current President Bush's own links to the firm go far deeper. In 1990, he was appointed to the board of one of Carlyle's first purchases, an airline food business called Caterair, which they eventually sold at a loss. He left the board in 1992, later to become Governor of Texas. Shortly thereafter, he was responsible for appointing several members of the board which controlled the investment of Texas teachers' pension funds. A few years later, the board decided to invest $100m of public money in the Carlyle Group. The firm's magic touch was already bringing results. Today, it is proving as fruitful as ever.
And here @: http://www.guardian.co.uk/Archive/Article/0,4273,4350486,00.html
Bush billions will revive cold war army
But defence experts say that will not help in the fight against terror
Julian Borger in Washington
Guardian
Wednesday February 6, 2002
The Bush administration attempted yesterday to justify a stunning leap in spending on the military as defence analysts criticised the budget for pumping money into conventional weaponry inherited from the cold war era.
Donald Rumsfeld, the defence secretary, defended the the 11% increase in Pentagon expenditure yesterday, telling the Senate armed services committee that it was necessary to compensate for "a decade of overuse and underfunding", and to prepare for future wars beyond the current anti-terrorist campaign.
"When the cold war ended, a defence drawdown [cutback] took place that went too far... overshot the mark," the defence secretary said. "Now, through the prism of September 11, we can see that our challenge is not simply to fix the underfunding of the past."
However, a breakdown of the budget figures suggests that relatively little of the $379bn (£266bn) planned spending for 2003 is directly relevant to the requirements of combating shadowy terrorist groups such as al-Qaida.
A far greater proportion of the defence budget will go towards "big ticket" weapon systems designed for the large-scale conventional battles envisaged during the cold war. They had been facing the axe under the "military transformation" initially planned by George Bush and Mr Rumsfeld.
The sharp rise in defence spending proposed in President Bush's budget marks a defeat for reformers who had planned to transform the US military into a lighter, more mobile and more efficient force. Among the programmes to have survived widely expected cuts are three separate tactical warplanes with overlapping functions demanded by the armed forces: the navy's super hornet, the air force's F- 22 raptor and the joint strike fighter (JSF) intended for all the services.
On the campaign trail, Mr Bush said the country could not afford all three aircraft, but the budget allocates $12bn to be spent on them in 2003. When the JSF enters full production, it will cost twice as much as the current workhorse, the F-16, with a total bill of $200bn.
Another controversial weapon given a reprieve in Monday's budget is the crusader artillery system, a hefty mobile gun which critics said might have performed well in big land battles against Soviet tanks, but which is too heavy to be rapidly deployed in far-flung corners of the globe.
Paul Krugman, a liberal economist, argued in yesterday's New York Times: "The military build-up seems to have little to do with the actual threat, unless you think that al-Qaida's next move will be a frontal assault by several heavy armoured divisions."
Loren Thompson, a senior analyst at the Lexington Institute, an independent defence thinktank, said the budget reflected "the staying power of a deeply entrenched bureaucracy in terms of protecting programmes it values".
Mr Rumsfeld and his chief strategic adviser, Andrew Marshall, had hoped to accelerate the pace of military reform, but even before September 11 they found themselves blocked by the heads of the armed services who refused to scrap established projects to make money available for a new generation of weapons such as the national missile defence (NMD) system, the B-2 stealth bomber and unmanned aircraft.
The terrorist attacks on New York and Washington - combined with Mr Bush's declaration that the US was threatened by an "axis of evil" consisting of Iraq, Iran and North Korea - has created a political atmosphere in which both sides in the debate can pursue their strategies at the same time.
"Instead of wiping away previous priorities, Rumsfeld has just added his projects on top of them," Mr Thompson said.
As well as earmarking funds for the crusader, the three tactical aircraft and a host of other established projects, the budget sets aside $7.8bn for NMD and $630m for more global hawk unmanned aircraft.
According to Steven Kosiak, an analyst at the Centre for Strategic and Budgetary Assessments, the total 2003 defence budget will be 11% higher than the average military expenditure during the cold war. By 2007, under the Bush plan, defence spending will be 20% higher than average cold war levels.
"Some advocates of transformation are not going to be happy," Mr Kosiak said. "It's partly because there is so much money available the administration does not have to make choices."
In the current political atmosphere, Congress is unlikely to question the defence budget and may even insist on boosting it further. Among the big winners will be the defence contractors such as Lockheed Martin, Boeing and United Defence, which makes the crusader.
The majority stake in United Defence is owned by the Carlyle Group, an investment company which employs George Bush, the president's father, and the former British prime minister John Major as lobbyists to open doors in the US and abroad. The elder Mr Bush has converted speaking fees into Carlyle stock, and stands to benefit considerably from the crusader's reprieve.
Another significant consequence of the jump in US defence spending, most defence experts agree, is the further weakening of Nato.
In Kosovo and Afghanistan, America's Nato allies had little to contribute to the hi-tech air war that was the basis of US strategy. The Bush defence plan is likely to widen the technological gap, reinforcing the administration's ideological preference for unilateralism.
What the money is being spent on
Missile defence
$7.8bn
Aircraft
Navy F/A-18E/F super hornet $3.3bn
Air force F-22 raptor $5.2 bn
F-35 joint strike fighter $3.5bn
Global hawk unmanned aircraft $630m
Artillery
Crusader artillery system $475m
[ 13-03-2002: Message edited by: will it work wright? ] |
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, and—presumably—George H.W. Bush?